Three Facts You Should Know About Intellectual Property

IP is here to stay. It will impact your life countless times before you even brush your teeth. It is not evil. It is a tool that is used both for and against the public interest.

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I realized not long ago, to my own surprise, that I had worked in intellectual property for nearly two years. Intellectual property. A field dominated by corporate lawyers and too many consultancies to count. Considering the vast literature on intellectual property (IP) , there is little need for long introductions. Essentially, IP is when the state grants artificial monopolies to individuals to exploit creative work such as scientific innovations, films, music, books, trademarks and designs.

Though many industry professionals recoil in horror when they read IP and monopoly in the same sentence, this is effectively what IP is. We grant monopoly rights, so the argument goes, in order to foster incentives for the creation of works that benefit society. Society needs ideas. People have them. The state grants a monopoly right to stimulate their economic exploitation. Far be it from me to question this sacred tenant of the much heralded knowledge economy. Some have . But these few are frequently painted as the lunatic fringe of a well-oiled free market machine that awkwardly defends creating artificial monopolies via state intervention.

IP influences our lives every day. Though often portrayed as a complex legal matter best left to lawyers, nothing is further from the truth. IP is profoundly political. It is an immensely powerful legal construct that can be used to foster technological innovation, stifle competition, restrict access to medicine and remove your YouTube video all in the same breath. Considering that IP is now enforced globally via the WTO’s trade-related aspects of intellectual property rights (TRIPS) clauses , some of its darker aspects should be known. The list is by no means exhaustive. Nor is it a call to arms to bludgeon your local patent lawyer. This list is, simply, a list of three facts to remember about IP.

1. We can accumulate patents without innovating.

With research and development (R&D) costs skyrocketing for new drugs and technologies, it is no surprise we have a patent system to reward innovators. Society benefits from innovations by facilitating their diffusion. Patents reassure innovators they will profit from this diffusion. Using patented technology without paying for it can result in astronomical fines. Think Apple vs. Samsung.

But what happens when someone can accumulate patents without innovating? Non-practicing entities (NPEs) accumulate patent portfolios in order to profit from infringement settlements and extract license fees. Derisively called patent trolls, NPEs have grown rapidly. NPEs sued less than 250 companies in 1998. By 2010, that number shot up to 2,600. Major NPEs like Intellectual Ventures own an estimated 10,000 – 15,000 patents. Some argue they aggregate rights to facilitate technology licensing. Yet, most of these companies contribute little to the economy except the dividends generated for shareholders from suing manufacturers.

2. We can patent biological organisms.

This concept received an enormous amount of press over the years. Reports suggest over 1/5 of human genes had been patented by 2005. Recent court decisions upheld that firms could patent isolated human genes. The same goes for seeds. Horror stories abound of farmers around the world being sued by companies like Monsanto for not paying license fees for crops they have been growing for generations. Patented seeds can produce higher yields and resist disease. But they can also be invasive and sterile.

Why not limit their reproductive lifespan to ensure farmers have to continue paying for legally protected seeds? The logic is devastatingly cruel and profitable. As powerful new gene sequencing techniques become increasingly cheap, there is no limit to the quantity of biological data that will transfer into private hands . There is opportunity for enormous medical progress. But at what cost?

3. We can centralize ownership of culture.

Copyright historically enabled corporations to accumulate vast repertoires of film, music and books. Take music: four companies – Universal, Warner, Sony, and EMI – control approximately 75% of the global music market. Pre-Internet, this situation was justified by reference to the investment necessary for production, distribution and marketing of content.

With communications technologies decimating these costs, one might expect a bright new future where the interests of a handful of corporations no longer drive the global supply of cultural content. Sure, the music industry is experiencing the rise of independent label market share. But don’t expect these cultural behemoths to go quietly into the night. End-user piracy litigation, digital rights management and centralized online distribution on platforms like the iTunes store shows the oligarchs are fighting hard.

Where We Stand

I have focused here on worrying aspects of IP and been extremely brief. I believe in IP. Artists should make money. Scientists should be rewarded for their discoveries. My patience runs thinner with companies that exploit the concept of corporations as legal individuals to accumulate huge patent, copyright and trademark portfolios. Enforcing their monopoly rights around the world, they increasingly influence how people create, transmit and experience cultural and scientific works.

Yet, new opportunities to promote public welfare using IP are on the rise. Open source software uses GNU GPL licenses to ensure all derivative software is free and open. Creative commons licenses protect artists’ rights while offering a greater scope of distribution and collaboration. These are just some of the more high-profile examples.

IP is here to stay. It will impact your life countless times before you even brush your teeth. It is not evil. It is a tool that is used both for and against the public interest. Yet, it is a property right justified with respect to social welfare. Let’s keep that in mind when we consider why and how we protect our ideas.

2 thoughts on “Three Facts You Should Know About Intellectual Property”

Thank you for your concise and informative IP intro. I would like to gauge your view on a few points…
You say IP is here to stay, and note the importance of protecting our ideas, R&D. I totally agree with the latter statement, but would query the former. Currently, my primary focus has been on the various facets of cyber security. One element is the evolution of espionage from the lone spook lifting a few handfuls of documents over many years, to the loss of entire libraries of data within minutes. I believe this is having an devastating impact on the long-term viability of IP as we know it. I do not just mean military espionage, but theft of IP from private companies, public bodies, research institutions, nuclear laboratories, universities etc. Everything from chemical formulas and engineering designs, to Nike’s new Air Max trainer and Apples’ newest iPad designs. Almost any and all IP. The NCIX Report (2011) confirms that every major company in the US had been successfully penetrated by cyber attacks. Mi5 recently sent out letters to the top 500 UK companies stating that they must assume that their systems have been breached, and that any information of value has been compromised. Indeed the Director of the NSA recently stated that the transfer of IP and trade secrets (via cyber-attacks, most of which can be traced back to Chinese servers) is the greatest transfer of wealth in human history.
What is your take then, on IP violations/infringements that cannot be directly attributed to a guilty party or even country?
How, and indeed can, IP rights be enforced in this context?
And given the extent of IP theft, does IP as it exists today really have a future?
Thanks a lot, and great article. H

HenrySevers
Thanks for your comments Henry. I wish I had more knowledge about cyber security and the NCIX Report to do full justice to your question but I’ll gladly share some thoughts..
I think your question about IP infringement is one that companies and governments are battling with very seriously. What you describe is on a frighteningly large and pervasive scale but it seems similar in kind to the whole internet piracy debate made possible by peer-to-peer networks and torrent clients. I mean this in the sense that there is widescale, and anonymous, infringement of IP online. For example, with music downloading, the industry first reacted by suing end-users. When they realized the futility of that approach due to the scale of the problem they started shutting down the clients (think of the Napster, Limewire, Gnutella seizures; or even the Ninjavideo and Megavideo seizures by the DOJ in the USA). Then they realized new clients would pop up every time they shut one down so major copyright lobbying groups started pushing for laws that made ISPs responsible for cutting off illegal downloaders internet connections (the most famous example being France’s loi HADOPI). When IP violations cannot be directly attributed (or when doing so has little impact on stopping them due to the scale and frequency of the violations) I think that IP owners turn to increasingly aggressive measures.
In this context I think the enforcement of IP rights becomes highly problematic because the proposed solution can often cause more harm than the problem it is fighting. However, I wouldn’t say that IP as it exists today doesn’t have a future as a result. If anonymous hackers on the Internet are able to circumvent every security system in the world than IP becomes even more important. Those companies or institutions that could have protected their ideas as trade secrets are now unable to do so because the integrity of their IT infrastructure is compromised. Coca Cola has never patented their recipe but kept it as one of the tightest trade secrets in the world. In the world you describe, that would no longer be possible. In that context I think the enforcement of IP becomes even more significant. I couldn’t tell you how it would be effectively enforced, but I don’t see it as a cause for the death of IP either. I just hope that in the process of enforcing IP we don’t come up with measures that compromise the freedom and integrity of the Internet as a communication medium.
Thanks again for your comments and sorry for the long-winded response. It’s a very hard question to answer.
Ben

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